Student loan decision will impact locals
Published 10:30 am Wednesday, July 5, 2023
Students and businesses alike have waited with bated breath to see how the U.S. Supreme Court would rule ever since President Joe Biden’s federal student loan forgiveness plan was blocked last year.
On Friday, SCOTUS ruled 6-3 against Biden’s plan, claiming that the president does not have the authority to forgive such debt. Student loan borrowers will have to resume making payments in October this year.
Before the Supreme Court blocked it, the Federal Student Loan Forgiveness plan sought to forgive loan amounts of $10,000 and $20,000 for students who made less than $125,000 in 2020 or 2021. According to Ben Johnson, Southern Union State Community College Professor of Economics, the plan would have put the government in debt of around $300-$400 million.
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Many students and graduates likely saw the student loan forgiveness program as a chance to be free of a burden and establish a stable future for themselves. According to U.S. News data, college graduates’ average student loan debt was about $30,000 in 2022.
Accruing large amounts of student loan debt impacts many decisions in a person’s life. The most obvious impact is that borrowers have less disposable income and decreased consumer rates. About 50% of graduates delay moving out of the family home after schooling to offset their expenses.
Registered Nurse Adrian Holloway said student loan forgiveness was a “godsend” for her.
Holloway majored in nursing at Jacksonville State University. Like many others, she relied on financial aid for her education.
Throughout her college, Holloway juggled her academics and her child. The financial burden that student loans left on her were immense.
For many students, the financial burden of student loans often halts their education and career advancement. Holloway ended up having to pause her graduate studies. She said she had to decide between her family’s basic needs and paying a $700 monthly payment.
Despite achieving her higher education, Holloway said she often had to make minimum payments, look into payment programs and sometimes defer her loans to help sustain her household income.
“For me, that was the thing that helped that was over my head that kept me from getting ahead,” Holloway said.
“If ever there was any extra that I wanted to put in savings or this or that, student loans was that thing that was over my head.”
High student loan debt is also linked to increased depression, anxiety, and suicidal thoughts.
“Debt is a psychological burden. It’s something that prevents people from sleeping soundly at night. Potentially some type of debt relief can help mentally put people in better places,” Johnson said. “But from the economic ramification, I don’t know. The jury’s out.”
Holloway was eventually awarded student loan forgiveness for her full loan debt of nearly $80,000. She received public service loan forgiveness for her 15 years working at a not-for-profit hospice care facility.
“I could not even really express how grateful I am for that,” Holloway said. “Because, again, that was kind of a thorn in my side, if you will.”
Holloway also serves as the community liaison for the Equitable Neighborhoods Initiative and PHYRE, a community group that serves the youth of LaFayette.
As an active community member and registered nurse, Holloway said she has seen and experienced firsthand the strain that student loan debt has on graduates. She said people, especially from low socioeconomic backgrounds, go to college to alleviate a financial burden yet face more debt than ever.
“They’re wanting to go to college wanting to be better, to make a difference, to be productive members of society, and we need assistance to do that,” Holloway said. “So, a lot of times, we either end up with student loans or we end up back home.”
If the SLF had passed, the government would have to consider how the debt would be paid. In the short term, Johnson said it would become debt issuance.
Though politicians may raise taxes to offset the debt in the future, the sum will be added to the country’s current debt.
“For us not to face our debt crisis today means that our children will,” Johnson said. “You can kick the can a couple of times, but it doesn’t go away.”
So, what impact might it have on the economy if the government were to print more money? It largely depends on the marginal consumption propensity, which means how much of each additional dollar consumers will use toward consumption versus savings.
“I wouldn’t see it as a true inflation fuel. It’s just it’s not large enough,” Johnson said. “That sounds crazy in today’s times. But $30 billion, in my opinion, is not large enough.”
Johnson said despite this, the contribution to the national debt would be “the slow bleed of the American future.”
“You’re staring at a national debt of $32 trillion. That’s the highest national debt this country’s ever had … I don’t know how sustainable this is,” Johnson said.
The U.S. current debt-to-GDP ratio is 123.4%. The figure compares what the country owes to what it is producing.